September 15, 2020
CARNIVAL
CORPORATION & PLC REPORTS SUMMARY THIRD QUARTER RESULTS AND
OTHER MATTERS
Carnival Corporation & plc (the “company”) is disclosing
summary preliminary financial information for the quarter ended
August 31, 2020, on Form 8-K with the
U.S. Securities and Exchange Commission (“SEC”).
- Schedule A contains Carnival Corporation & plc’s
summary preliminary financial information for the quarter ended
August 31, 2020
The Directors consider that within the Carnival Corporation and
Carnival plc dual listed company arrangement, the most appropriate
presentation of Carnival plc's results and financial position is by
reference to the Carnival Corporation & plc U.S. GAAP
consolidated financial statements.
MEDIA
CONTACT
INVESTOR RELATIONS CONTACT
Roger
Frizzell
Beth Roberts
001 305 406
7862
001 305 406 4832
The Form 8-K is available for viewing on the SEC website at
www.sec.gov under Carnival Corporation or Carnival plc or the
Carnival Corporation & plc website at www.carnivalcorp.com or
www.carnivalplc.com.
Carnival Corporation & plc is one of the world’s
largest leisure travel companies with a portfolio of nine of the
world’s leading cruise lines. With operations in North
America, Australia, Europe and Asia, its portfolio features – Carnival Cruise
Line, Princess Cruises, Holland America Line, P&O
Cruises (Australia),
Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK)
and Cunard.
Additional information can be found on www.carnivalcorp.com,
www.carnivalsustainability.com, www.carnival.com, www.princess.com,
www.hollandamerica.com, www.pocruises.com.au, www.seabourn.com,
www.costacruise.com, www.aida.de, www.pocruises.com and
www.cunard.com.
SCHEDULE A
THIRD QUARTER 2020 SUMMARY PRELIMINARY
FINANCIAL INFORMATION
- U.S. GAAP net loss of $(2.9)
billion for the third quarter of 2020, which includes
$0.9 billion of non-cash impairment
charges.
- Third quarter 2020 adjusted net loss of $(1.7) billion.
- Cash burn rate in the third quarter 2020 and the expected
rate for the fourth quarter are both in line with the previously
disclosed expectation.
- Third quarter 2020 ended with $8.2
billion of cash and cash equivalents. The company expects to
further enhance future liquidity, opportunistically.
- Costa successfully resumed guest cruise operations on
September 6, 2020.
- AIDA has announced plans to restart guest cruise operations
during the fall 2020.
- A total of 18 less efficient ships have left or are expected
to leave the fleet, representing approximately 12 percent of
pre-pause capacity and only three percent of operating income in
2019.
- Cumulative advanced bookings for the second half of 2021
capacity currently available for sale are at the higher end of the
historical range, despite minimal advertising or
marketing.
Carnival Corporation & plc President and Chief Executive
Officer Arnold Donald noted, "Just
six months after we paused cruise operations across our global
fleet, this past weekend, we successfully completed our first seven
day cruise on our Italian brand Costa. Soon a second of our nine
World's Leading Cruise Lines' brands will resume guest operations,
our German sourced brand AIDA. Our business relies solely on
leisure travel which we believe has historically proven to be far
more resilient than business travel and cannot be easily replaced
with video conferencing and other means of technology. Our
portfolio includes many regional brands which clearly position us
well for a staggered return to service in the current
environment.
We continue to take aggressive action to emerge a leaner more
efficient company. We are accelerating the exit of 18 less
efficient ships from our fleet. This will generate a 12% reduction
in capacity and a structurally lower cost base, while retaining the
most cash generative assets in our portfolio.
With two thirds of our guests repeat cruisers each year, we
believe the reduction in capacity leaves us well positioned to take
advantage of the proven resiliency of, and the pent up demand for
cruise travel - as evidenced by our being at the higher end of
historical booking curves for the second half of 2021.
We will emerge with a more efficient fleet, with a stretched out
newbuild order book and having paused new ship orders, leaving us
with no deliveries in 2024 and only one delivery in 2025, allowing
us to pay down debt and create increasing value for our
shareholders.”
Resumption of Guest Operations
In the face of the global impact of COVID-19, the company paused
its guest cruise operations in mid-March. The company resumed
limited guest operations on September 6,
2020, with Costa Cruises' ("Costa") successful voyage
visiting five destinations in Italy. The company plans to continue the
limited resumption of its guest cruise operations with additional
Costa ships over September and October, as well as with AIDA
Cruises' ("AIDA") during the fall 2020. These brands are beginning
the company's anticipated gradual, phased-in resumption of guest
cruise operations. The initial cruises will continue to take place
with adjusted passenger capacity and enhanced health protocols
developed with government and health authorities, and guidance from
our roster of medical and scientific experts.
Other brands and ships are expected to return to service over
time to provide guests with unmatched joyful vacations in a manner
consistent with the company's highest priorities, which are
compliance, environmental protection and the health, safety and
well-being of its guests, crew, shoreside employees and the people
in the communities its ships visit. Many of the company's brands
source the majority of their guests from the geographical region in
which they operate. In the current environment, the company
believes this will benefit it in resuming guest cruise
operations.
Costa and AIDA
Costa successfully restarted guest cruise operations with one
initial ship, Costa Deliziosa, sailing from Italian Ports on
September 6, 2020, and is expected to
be followed by an additional ship, Costa Diadema, departing
from Genoa beginning September 19, 2020. After the September restart
with these two ships exclusively for Italian guests, Costa expects
to gradually increase the number of ships that will resume
operations, offering cruises for residents in Europe. AIDA expects to resume its guest
cruise operations during the fall 2020 with sailings in the Canary
Islands and the western Mediterranean.
Health and Safety
Protocols
Working with global and national health authorities and medical
experts, Costa and AIDA have a comprehensive set of health and
hygiene protocols to help facilitate a safe and healthy return to
cruise vacations. Both brands are providing guests with detailed
information about enhanced protocols, which are modeled after
shoreside health and mitigation guidelines as provided by each
brand's respective country, and approved by the flag state,
Italy. Protocols will be updated
based on evolving scientific and medical knowledge related to
mitigation strategies.
Costa is the first cruise company to earn the Biosafety Trust
Certification from RINA. The certification process examined all
aspects of life onboard and ashore and assessed the compliance of
the system with procedures aimed at the prevention and control of
infections. Costa's comprehensive set of measures and procedures
implemented on Costa Deliziosa cover key areas such as crew
health and safety, the booking process, guest activities,
entertainment and dining, and medical care on board, as well as
pre-boarding, embarkation and disembarkation operations, which
includes testing for all guests prior to embarkation.
More broadly, as the understanding of COVID-19 continues to
evolve, the company has been working with a number of world-leading
public health, epidemiological and policy experts to support its
ongoing efforts with enhanced protocols and procedures for the
return of cruise vacations. These advisors will continue to provide
guidance based on the latest scientific evidence and best practices
for protection and mitigation.
Optimizing the
Future Fleet
The company expects future capacity to be moderated by the
phased re-entry of its ships, the removal of capacity from its
fleet and delays in new ship deliveries. Since the pause in guest
operations, the company has accelerated the removal of ships in
fiscal 2020 which were previously expected to be sold over the
ensuing years. The company now expects to dispose of 18 ships,
eight of which have already left the fleet. In total, the 18 ships
represent approximately 12 percent of pre-pause capacity and only
three percent of operating income in 2019. The sale of less
efficient ships will result in future operating expense
efficiencies of approximately two percent per available lower berth
day ("ALBD") and a reduction in fuel consumption of approximately
one percent per ALBD. The company expects only two of the four
ships originally scheduled for delivery in 2020, following the
start of the pause, to be delivered prior to the end of fiscal
2020. The company currently expects only five of the nine ships
originally scheduled for delivery in fiscal 2020 and 2021 to be
delivered prior to the end of fiscal year 2021. The company
currently expects 9 cruise ships and 2 smaller expedition ships of
the 13 ships originally scheduled for delivery prior to the end of
fiscal year 2022 to be delivered by then.
Based on the actions taken to date and the scheduled newbuild
deliveries through 2022, the company's fleet will be more efficient
with a roughly 13 percent larger average berth size and an average
age of 12 years in 2022 versus 13 years, in each case as compared
to 2019.
Update on Bookings
While the company believes bookings in the first half of 2021
reflect expectations of the phased resumption of its guest cruise
operations and anticipated itinerary changes, as of August 31, 2020, cumulative advanced bookings for
the second half of 2021 capacity currently available for sale are
at the higher end of the historical range and similar to where
booking positions were in 2018 for the second half of 2019. The
company believes this demonstrates the long-term potential demand
for cruising. Pricing on these bookings are lower by mid-single
digits versus the second half of 2019, on a comparable basis,
reflecting the effect of future cruise credits ("FCC") from
previously cancelled cruises being applied. The company continues
to take bookings for both 2021 and 2022.
The company is providing flexibility to guests with bookings on
sailings cancelled by allowing guests to receive enhanced FCCs or
elect to receive refunds in cash. Enhanced FCCs increase the value
of the guest's original booking or provide incremental onboard
credits. As of August 31, 2020,
approximately 45 percent of guests affected by the company's
schedule changes have received enhanced FCCs and approximately 55
percent have requested refunds.
Total customer deposits balance at August
31, 2020, was $2.4 billion,
the majority of which are FCCs, compared to total customer deposits
balance of $2.9 billion at
May 31, 2020. The decline in customer
deposits is consistent with previous expectations. As of
August 31, 2020, the current portion
of customer deposits was $2.1 billion with $0.1 billion relating to fourth quarter sailings.
Approximately 55 percent of bookings taken during the quarter
ending August 31, 2020 were new
bookings, as opposed to FCC re-bookings, despite minimal
advertising or marketing.
Increasing Liquidity
Carnival Corporation & plc Chief Financial Officer and Chief
Accounting Officer David Bernstein
noted, "We have over $8 billion of
available cash and additional financing alternatives to
opportunistically further improve our liquidity profile. We have
recently begun to optimize our capital structure with the early
extinguishment of debt on favorable economic terms and the
extension of debt maturities. Once we fully resume guest cruise
operations, we expect our cash flow potential will build a path to
further strengthen our balance sheet and return us to an investment
grade credit rating over time.”
Due to the pause in guest operations, the company has taken
significant actions to preserve cash and secure additional
financing to increase its liquidity. Since March, the company has
raised nearly $12 billion through a
series of financing transactions, including the following
transactions that occurred during the third quarter:
- Borrowed an aggregate principal amount of $2.8 billion in two tranches under a first
priority senior secured term loan facility on June 30, 2020
- Issued $1.3 billion aggregate
principal amount of second priority senior secured notes in two
tranches on July 20, 2020
- Entered into Debt Holiday amendments, deferring certain
principal repayments otherwise due through March 2021. (Certain export credit agencies have
offered a 12-month debt amortization and financial covenant holiday
(“Debt Holiday”))
- Completed a registered direct offering of 99 million shares of
its common stock and used the proceeds to repurchase $886 million of its 5.75% Convertible Senior
Notes due 2023 on August 10,
2020
- Issued $900 million aggregate
principal amount of second priority senior secured notes on
August 18, 2020
As of August 31, 2020, the company
has a total of $8.2 billion of
cash and cash equivalents.
Currently, the company is unable to predict when the entire
fleet will return to normal operations, and as a result, unable to
provide an earnings forecast. The pause in guest operations
continues to have a material negative impact on all aspects of the
company's business, including the company’s liquidity, financial
position and results of operations. The company expects a net loss
on both a U.S. GAAP and adjusted basis for the quarter and year
ending November 30, 2020.
The company's monthly average cash burn rate for the third
quarter 2020 was $770 million, which
was in line with the anticipated monthly cash burn rate. The
company expects the monthly average cash burn rate for the fourth
quarter of 2020 to be approximately $530
million. This results in an average monthly burn rate for
the second half of the year of $650
million as previously disclosed. This rate includes
approximately $250 million of ongoing ship operating and
administrative expenses, working capital changes (excluding changes
in customer deposits and reserves for credit card processors),
interest expense and committed capital expenditures (net of
committed export credit facilities) and also excludes scheduled
debt maturities. The company continues to explore opportunities to
further reduce its monthly cash burn rate.
The company estimates non-newbuild capital expenditures during
the fourth quarter of 2020 to be approximately $130 million. The company's scheduled debt
maturities are as follows:
(in
billions) |
4Q 2020 |
|
1Q 2021 |
|
2Q 2021 |
|
3Q 2021 |
|
4Q 2021 |
|
Principal Payments
(a) |
$ |
1.0 |
|
|
$ |
0.5 |
|
|
$ |
0.3 |
|
(b) |
$ |
0.6 |
|
|
$ |
0.2 |
|
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Excluding the Revolving Facility. As of May 31, 2020, borrowings under the Revolving
Facility were $3.0 billion, which
were drawn in March 2020 for an
initial term of six months. We may re-borrow such amounts subject
to satisfaction of the conditions in the Revolving Facility
Agreement. The company has principal balance of $0.5 billion and $0.8
billion of debt, otherwise due through 2032, for which
covenant waivers expire during the second quarter 2021 and fourth
quarter 2021, respectively. The company is working on extending
these covenant waivers. If the covenant waiver extensions are not
received, the company would be required to prepay the outstanding
principal balance.
Cautionary Note Concerning Factors
That May Affect Future Results
Carnival Corporation and Carnival plc and their respective
subsidiaries are referred to collectively in this document as
“Carnival Corporation & plc,” “our,” “us” and “we.” Some of the
statements, estimates or projections contained in this document are
“forward-looking statements” that involve risks, uncertainties and
assumptions with respect to us, including some statements
concerning future results, operations, outlooks, plans, goals,
reputation, cash flows, liquidity and other events which have not
yet occurred. These statements are intended to qualify for the safe
harbors from liability provided by Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements other than statements of historical facts are
statements that could be deemed forward-looking. These statements
are based on current expectations, estimates, forecasts and
projections about our business and the industry in which we operate
and the beliefs and assumptions of our management. We have tried,
whenever possible, to identify these statements by using words like
“will,” “may,” “could,” “should,” “would,” “believe,” “depends,”
“expect,” “goal,” “anticipate,” “forecast,” “project,” “future,”
“intend,” “plan,” “estimate,” “target,” “indicate,” “outlook,” and
similar expressions of future intent or the negative of such
terms.
Forward-looking statements include those statements that relate
to our outlook and financial position including, but not limited
to, statements regarding:
|
- Estimates of ship depreciable lives and residual values
|
|
- Goodwill, ship and trademark fair values
|
|
|
- Interest, tax and fuel expenses
|
- Adjusted earnings per share
|
|
- Impact of the COVID-19 coronavirus global pandemic on our
financial condition and results of operations
|
- Net cruise costs, excluding fuel per available lower berth
day
|
Because forward-looking statements involve risks and
uncertainties, there are many factors that could cause our actual
results, performance or achievements to differ materially from
those expressed or implied by our forward-looking statements. This
note contains important cautionary statements of the known factors
that we consider could materially affect the accuracy of our
forward looking statements and adversely affect our business,
results of operations and financial position. Additionally, many of
these risks and uncertainties are currently amplified by and will
continue to be amplified by, or in the future may be amplified by,
the COVID-19 outbreak. It is not possible to predict or identify
all such risks. There may be additional risks that we consider
immaterial or which are unknown. These factors include, but are not
limited to, the following:
- COVID-19 has had, and is expected to continue to have, a
significant impact on our financial condition and operations, which
impacts our ability to obtain acceptable financing to fund
resulting reductions in cash from operations. The current, and
uncertain future, impact of the COVID-19 outbreak, including its
effect on the ability or desire of people to travel (including on
cruises), is expected to continue to impact our results,
operations, outlooks, plans, goals, growth, reputation, litigation,
cash flows, liquidity, and stock price
- As a result of the COVID-19 outbreak, we may be out of
compliance with a maintenance covenant in certain of our debt
facilities, for which we have waivers for the period through
March 31, 2021 with the next testing
date of May 31, 2021
- World events impacting the ability or desire of people to
travel may lead to a decline in demand for cruises
- Incidents concerning our ships, guests or the cruise vacation
industry as well as adverse weather conditions and other natural
disasters may impact the satisfaction of our guests and crew and
lead to reputational damage
- Changes in and non-compliance with laws and regulations under
which we operate, such as those relating to health, environment,
safety and security, data privacy and protection, anti-corruption,
economic sanctions, trade protection and tax may lead to
litigation, enforcement actions, fines, penalties, and reputational
damage
- Breaches in data security and lapses in data privacy as well as
disruptions and other damages to our principal offices, information
technology operations and system networks, including the recent
ransomware incident, and failure to keep pace with developments in
technology may adversely impact our business operations, the
satisfaction of our guests and crew and lead to reputational
damage
- Ability to recruit, develop and retain qualified shipboard
personnel who live away from home for extended periods of time may
adversely impact our business operations, guest services and
satisfaction
- Increases in fuel prices, changes in the types of fuel consumed
and availability of fuel supply may adversely impact our scheduled
itineraries and costs
- Fluctuations in foreign currency exchange rates may adversely
impact our financial results
- Overcapacity and competition in the cruise and land-based
vacation industry may lead to a decline in our cruise sales,
pricing and destination options
- Geographic regions in which we try to expand our business may
be slow to develop or ultimately not develop how we expect
- Inability to implement our shipbuilding programs and ship
repairs, maintenance and refurbishments may adversely impact our
business operations and the satisfaction of our guests
The ordering of the risk factors set forth above is not intended
to reflect our indication of priority or likelihood.
Forward-looking statements should not be relied upon as a
prediction of actual results. Subject to any continuing obligations
under applicable law or any relevant stock exchange rules, we
expressly disclaim any obligation to disseminate, after the date of
this document, any updates or revisions to any such forward-looking
statements to reflect any change in expectations or events,
conditions or circumstances on which any such statements are
based.
CARNIVAL
CORPORATION & PLC
NON-GAAP FINANCIAL
MEASURES
|
Three Months Ended
August 31, |
|
Nine Months Ended
August 31, |
(in
millions) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income
(loss) |
|
|
|
|
|
|
|
U.S. GAAP net income (loss) |
$ |
(2,858) |
|
|
$ |
1,780 |
|
|
$ |
(8,014) |
|
|
$ |
2,567 |
|
(Gains) losses on ship sales and
impairments |
937 |
|
|
14 |
|
|
3,819 |
|
|
— |
|
Restructuring expenses |
3 |
|
|
— |
|
|
42 |
|
|
— |
|
Other |
220 |
|
|
25 |
|
|
223 |
|
|
47 |
|
Adjusted net income (loss) |
$ |
(1,699) |
|
|
$ |
1,819 |
|
|
$ |
(3,930) |
|
|
$ |
2,614 |
|
Explanations of
Non-GAAP Financial Measures
Non-GAAP Financial Measures
We use adjusted net income as a non-GAAP financial measure of
our cruise segments’ and the company’s financial performance. This
non-GAAP financial measure is provided along with U.S. GAAP net
income (loss).
We believe that gains and losses on ship sales, impairment
charges, restructuring costs and other gains and losses are not
part of our core operating business and are not an indication of
our future earnings performance. Therefore, we believe it is more
meaningful for these items to be excluded from our net income
(loss), and accordingly, we present adjusted net income excluding
these items.
The presentation of our non-GAAP financial information is not
intended to be considered in isolation from, as substitute for, or
superior to the financial information prepared in accordance with
U.S. GAAP. It is possible that our non-GAAP financial measures may
not be exactly comparable to the like-kind information presented by
other companies, which is a potential risk associated with using
these measures to compare us to other companies.